"There are only two ways of telling the complete truth—anonymously and posthumously."—Thomas Sowell

Saturday, June 11, 2005

Aid to Africa—the Next Wave

Reuters reports, "The world's wealthiest countries agreed on Saturday to write off more than $40 billion of African debts."

"The deal struck by finance ministers from the Group of Eight industrialized nations is part of a British-led campaign to rid sub-Saharan Africa of poverty and diseases such as malaria and AIDS that kill millions every year.

"British Finance Minister Gordon Brown said the deal would provide 100 percent write-offs immediately for 18 countries and that more countries would qualify for relief later."

Brtitain, chairing the G8 this year, is seeking to double aid to the world's poorest countries by issuing $100 billion of bonds backed by wealthy nations' development budgets. The United States and Japan oppose the plan.

Reuters reports that former rock music star Bob Geldof and others are "urging a million people to turn up in Gleneagles, Scotland, [at next month's G8 meeting] to demand a deal on aid for Africa."

The debt relief campaigners who are complaining that the deal is a drop in an ocean of need are correct, but there is great room for debate over whether debt relief and more aid directed to the governments of most African nations is the best course.

That debate will certainly arise, and it will undoubtedly be heated.

As we evaluate that argument in the coming weeks, it will be important to bear in mind one central fact:

Nobody in any position of responsibility wants Africa to be mired in poverty, disease, and despair.

Nobody—not the United States and Japan, not Great Britain, not the leaders of other wealthy nations, not the leaders of African nations—nobody wants Africa to be poor.

Everybody, on both sides of the argument over African aid, wants Africa to become healthy and prosperous.

The question is, how to do it. Government-to-government aid and NGO-to-government aid have proven ineffective. There can be no doubt of that. The request for debt forgivness shows that, for if the past half-century of aid directed to African governments had been effective, the present discussion would be moot. Fast growth is possible, but aid to the post-colonial African governments has been a failure. The legacy of colonialism is reall but cannot explain or excuse this failure, for other post-colonial nations have prospered greatly during the same period.

Moreover, it is axiomatic that debt forgiveness rewards profligacy. The relief that is sent seldom trickles down to the people and is instead used to prop up corrupt governments. These are facts, not moral judgments.

The people of Africa, like all people anywhere, deserve better.

The current and proposed rounds of debt forgiveness probably will not do much harm in encouraging corruption among African governments, and should probably move forward. FOr all too many African governments, it would be difficult to be less responsive to the needs of their people.

There are other ways to accomplish aid to Africa, however, and it is time that these move to the fore while we work out the debt relief question.

One excellent proposal is to make the World Bank a true bank, one that allows private organizations in developing nations to draw on accounts that will enable them to implement individualized projects covering a wide variety of constructive activities that give aid where it will do the most good, such as in construction of hospitals, water treatment, malaria prevention, agriciultural technology, building of roads (a critical problem in many African countries), literacy, immunization, AIDS prevention and treatment (including unbiased research into the causes of Africa's high incidence of the disease), and much, much more.

Other, similar, new financing approaches could fund a great flowering of help for Africa, directed where it will do the most good. People in the wealthy nations want to help, but their aid has not been effective.

Governments all over the world have perpetually proven that their first priority is that of retaining their own power. That is a given, and we cannot change it. We can, however, use it to force those governments to allow help from other nations to reach their people. The next wave of aid to Africa, therefore, must include requirements that governments receiving aid allow the kind of targeted, widespread aid outlined here to reach the people of Africa.

Only then will the wealthy nations truly be able to help the people of Africa.

10 comments:

For anyone interested in this topic, I recommend Jeffrey Sachs' "The End of Poverty." He discusses this problem in-depth, and also agrees that direct-to-government aid in Africa has failed. He highlights several innovative, direct-aid programs that have made huge differences in the villages targeted by their pilot projects.

"Nobody in any position of responsibility wants Africa to be mired in poverty, disease, and despair."

Your optimism is unsupported by the history of the region. VArious corporate and government bodies most definitely prefer Africa (or at least the segments of it they use) poor. Take a quick look at the diamond trade as an example. Then move on to the Ivory trade. The Tantalum trade. And so on until you run out of natural resources that exist on the African Continent and Foreigners eager to exploit them.

The diamond trade does not impoverish Africa, nor does the ivory trade (illegal at this point), nor any other trade in natural resources. These industries do not enrich the average population of the African nations, and that is perfectly in line with my overall point. The problems within Africa lie mainly--mainly, not exclusively--in the governments of the nations of the continent. Uganda was a hellhole under Idi Amin, but after just a few years under Musaveni it is by all statistical measures one of the very, very few recent success stories on the continent. And Uganda does not have an abundance of wealth-"producing" natural resources.

An abundance of natural resources is in fact far more likely to make a nation poor than to make it rich. Hong Kong, Singapore, and Taiwan have no natural resources whatever; what makes nations wealthy is people, people who are educated and free to work hard, innovate, and keep the lion's share of the proceeds of their labor.

Now, there is a lot that must be done in Africa for the people to be so, and that is what my proposal is meant to address.

Neither the wealthy nations nor international corporations want Africa to be poor. The question is what to do about it. My suggestion is one important means of addressing that question.—STK

Come on Karnick, you must see the gaping flaw in this reasoning. Corporations have no intention of making Africa a market. You sell to the US. To China. To Japan. To Europe. You sell in wealthy areas of the world. You manufacture in poor ones. Or are you claiming that corporations also don't want to see malaysia stay poor?

"The diamond trade does not impoverish Africa, nor does the ivory trade (illegal at this point), nor any other trade in natural resources. These industries do not enrich the average population of the African nations, and that is perfectly in line with my overall point. The problems within Africa lie mainly--mainly, not exclusively--in the governments of the nations of the continent."

AND THOSE WHO WORK WITH THEM, which coincidentally are the same people you would recommend to help solve the problem they created. The diamond trade (as only one example) serves to make huge amounts of money for foreign firms and corrupt african politicians. You can remove the politician (which is good) but you seem to ignore the foreign firms. Without these leaches things would not have gotten or remained this bad in africa but when all of your resources are extracted by foreign powers you tend to have a hard time bettering yourself.

"And Uganda does not have an abundance of wealth-"producing" natural resources."

Uh that helps support my point not yours. The nations without resources are those that ironically do better precisely because they aren't targets for corporate skulldudgery.

"what makes nations wealthy is people, people who are educated and free to work hard, innovate, and keep the lion's share of the proceeds of their labor."

No. Throughout the history of economics what has made a country wealthy is having another people they can exploit. Feudal economies exploited serfs. Colonial economies exploited slaves. Modern economies exploit the third world.

"Neither the wealthy nations nor international corporations want Africa to be poor."

Again the weight of evidence is against you here. There are a great many who benefit greatly from Africa remaining poor. Until you admit that you'll never solve the problem because you don't understand the problem.

No, the problem is not that I fail to seek out information. I disagree that your sources are correct. I disagree strongly.

For example, I read the article you cited, from THE NATION. I disagree with its statements of fact and its interpretations. For example, the article says,

"This is what keeps Africa poor: not a lack of political will but the tremendous profitability of the current arrangement. Sub-Saharan Africa, the poorest place on earth, is also its most profitable investment destination: It offers, according to the World Bank’s 2003 Global Development Finance report, 'the highest returns on foreign direct investment of any region in the world.' Africa is poor because its investors and its creditors are so unspeakably rich."

The last sentence, the conclusion, is absolutely false. That is not why Africa is poor. The reason the returns on investment there are so high is that the only industries that exist are high-return industries such as extraction of diamonds and other precious commodities. Anything that is not extremely profitable cannot possibly lure investors to such an unstable place. The NATION article has the causation exactly backwards.

It is absurdly risky to invest in places where rule of law does not exist, where governments may take over a business's assets at any time, and where a new government may come on and close down your shop. As a result, only high-return ventures will receive any outside investments. The existence of only high-return investments is a sign not of outside exploitation but instead of a highly disturbed, unstable, and risky economic environment.

Businesses will invest in only the most easily profitable enterprises in sub-Saharan Africa because the nations there have disastrously poor economies, and the reason they have such bad economies is that the kleptocracies that run these nations can afford to do so on the returns from these extraction industries.

The money does not go to the people because that is the way the governments want it, NOT THE WAY THE CORPORATIONS WANT IT. You yourself have repeastedly stated that corporations do not care about the welfare of the common people. OK, then that means that they do not have any desire for them to be poor, either. They don't care one way or the other. (This is the logic of your premises; personally, I think that for a variety of reasons wealthy nations' investors would prefer to see these people prosper.) But their governments do have a stake in keeping the people poor, lest a large and rising prosperous class and middle class boot them out.

Note that you have repeatedly stated that corporations do not care about the condition of people in wealthy countries, either, but there are wealthy countries anyway, despite the corporations' devotion to their stockholders' interests and supposed lack of concern about Joe Average. Clearly the emotions of corporation managers have nothing to do with the creation of wealth and the spread of prosperity.

The difference between wealthy nations and poor ones is not in how much corporations care or don't care about people: by your own admission, they don't care at all, anywhere. And if you claim that things are better in the wealthy nations because the governments require corporations to toe the line (a dubious premise on many counts), that still leaves the African governments as the culprits.

No, the real difference is that the wealthy nations have a certain amount of economic freedom, which creates wealth. Combine sufficient wealth with sufficient freedom, and the people get wealthy. Combine wealth with autocracy, and the people are miserable. That is the problem in Africa today: autocracy. And the only way for the wealthy nations to go around those autocracies is to threaten to turn off the spigots. There are several ways to do so. My suggestion is one.—STK

"The last sentence, the conclusion, is absolutely false. That is not why Africa is poor. The reason the returns on investment there are so high is that the only industries that exist are high-return industries such as extraction of diamonds and other precious commodities. Anything that is not extremely profitable cannot possibly lure investors to such an unstable place. The NATION article has the causation exactly backwards."

You'd be correct except you keep leaving out that the people getting those high returns are the exact same ones who prevent the rule of law from ever getting traction. Reformers are murdered. Military coups are backed. By consistently leaving out the less than attractive actions of the foreign pillagers you keep pretending this is all somehow the fault of the Africans.

"The money does not go to the people because that is the way the governments want it, NOT THE WAY THE CORPORATIONS WANT IT. You yourself have repeastedly stated that corporations do not care about the welfare of the common people. OK, then that means that they do not have any desire for them to be poor, either. They don't care one way or the other."

Don't be ridiculous of course they want them poor. Poor people work for low wages. Poor people have no recourse to institutions that may try to reign in corporate abuses. poor people are easily bribed, easily threatened, and ultimately easily killed. Its the same reason that corporations everywhere fought violently against unions, because unions offered the workers some measure of leverage and that makes things more expensive. Paying people a living wage is the last thing a corporation wants to do. It wants the other guy to have to pay a living wage while they operate sweatshops. Again this isn't supposition, this is empirically supported by the history of corporations worldwide. Nike ring a bell? They could pay American workers well or they can operate a malaysian sweatshop. Which did they do? The sweatshop.

"But their governments do have a stake in keeping the people poor, lest a large and rising prosperous class and middle class boot them out."

These governments by and large are nothing but shell organizations. They exist at the largess of the corporate and foreign state powers. You are blaming the puppet instead of the puppeteers.

"Note that you have repeatedly stated that corporations do not care about the condition of people in wealthy countries, either, but there are wealthy countries anyway, despite the corporations' devotion to their stockholders' interests and supposed lack of concern about Joe Average. Clearly the emotions of corporation managers have nothing to do with the creation of wealth and the spread of prosperity."

As I said before wealthy countries come about because there is some other group of people to exploit. It may be a subgroups of the population or the population of another country entirely. But to bring it back to reality notice that the wealthy countries are also ones where corporate abuses have been reigned in by government regulation and the creation of unions. Poor counties just happen to be the places where corporations have a free hand. Funny coincidence that.

"The difference between wealthy nations and poor ones is not in how much corporations care or don't care about people: by your own admission, they don't care at all, anywhere. And if you claim that things are better in the wealthy nations because the governments require corporations to toe the line (a dubious premise on many counts), that still leaves the African governments as the culprits."

Not if those governments are far too weak to be anything but puppets to the foreign firms. Reformist leaders who intend to actually do something about the rape of their nations always end up dead. Another funny coincidence.

The Reform Club, c. 1915

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